Thursday, December 27, 2012

Xstrata Copper delivers Frieda River feasibility study

Xstrata Copper has delivered a feasibility study
together with the extended 2012 study for the Frieda copper gold project, Papua
New Guinea’s largest undeveloped open‐pit
copper‐gold project, joint
venture partner Highlands Pacific announced on Christmas Eve.

The extended 2012 study outlines a project with an
estimated initial capital requirement of US$5.6 billion, with a 20‐year open pit mine life
capable of producing on average an estimated 304,000 tpa (tonnes per annum) of
copper and 451,000 ozpa (ounces per annum) of gold in its first five years and
with an estimated life‐of‐mine (LOM) average
output of 204,000 tpa of copper and 305,000 ozpa of gold.

3D block model showing Horse/Ivaal/Trukai pit shell from the feasibility study
and significant drill intercepts from some of the adjacent copper gold targets

Potential exists to extend the mine life with deeper
drilling.

“The estimated project capital expenditure reflects
a number of changes since the pre‐feasibility
study was released in November 2010, most notably the substitution of a
proposed hydro‐electric
power‐supply scheme with gas‐generated electricity
sourced from PNG’s Stanley gas field 180km away,” Highlands Pacific announced.

“ The work done by Xstrata Copper and Highlands
during 2012 also identified the potential for additional capital savings in
relation to waste disposal which will require further work but could reduce the
initial capital spend to an estimated US$5 billion.

“The information presented in this announcement is
based on the documents that have been delivered to Highlands by Xstrata Copper.

“Xstrata Copper earned 72% in the Frieda Project in
January 2012 and a further 9.82% was contingent on delivery of the feasibility
study and the extended 2012 study.

“Highlands and its technical consultants, Behre
Dolbear Australia, will now review the documents in more detail for the
purposes of the relevant obligations of Xstrata Copper under the Frieda Project
joint venture agreements which were varied in November 2011.”

In Highlands’
view, the steps to be undertaken to make
a final investment decision (FID) for the project include:

•Further
discussion between the Frieda River joint venture participants and the PNG
government as to the government’s intentions to be involved in the project
including any equity;

•Further
work and finalisation of some aspects of the execution model;

•Renewal
of exploration licences due in May and November 2013; and

•
Further discussions with government and other stakeholders on the necessary
environmental and regulatory approvals.

Highlands has been free‐carried on Xstrata
Copper’s US$300 million (approximately) investment in the project and continues
to be carried in respect of costs incurred through an arrangement whereby
Highlands’ share of expenditure from January 2012 to the lodgement of special
mining licence (SML) application is to be repaid in the future from project
cashflows when Frieda is in production.

Xstrata Copper has proposed a work programme and
budget of US$20 million for 2013.

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